Monday, December 15, 2014

NASDAQ poised for a bounce, but will it stick?

First, see my previous post from Saturday for additional commentary.
 
NASDAQ futures are up sharply this morning, indicating a decent pop at the open, but the question is whether this bounce will stick and kick off further advances during the day or whether it will be yet another "dead-cat bounce" where hedge funds sell heavily into the rally and we see the gains from the open evaporate as the day goes by. It's 100% a question of whether any significant fraction of the hedge funds switch to a "risk on" bias or whether the majority continue to pursue a "risk off" negative bias. We can't know in advance what they will do, so we will have to see as the day progresses. We could also see a large gain due to the opening pop kicking off a short squeeze where hedge funds are forced to buy to cover short positions. Unfortunately, if that does happen, these guys will simply wait a day or so and then re-open their short positions  at a more attractive entry price, and then we could see any gain from today evaporate.
 
For now, NASDAQ is in a wide trading range. We are at the edge of a mini correction, but a decent rally today would send NASDAQ back towards the other, upper edge of the trading range.
 
Last night I was expecting to buy more Oil (OIL) and Tesla (TSLA) at the open, but I probably won't if the opening pop is more than minor.
 
-- Jack Krupansky

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